For trucking and transportation companies, managing insurance isn’t for the faint of heart. Premiums are on the rise, legal settlements are increasing, and equipment is getting more expensive. In addition, new rules and legislation are changing how safety is understood and measured. As the landscape shifts, technologies that help put driver safety at the forefront are playing a key role in reshaping the industry, and also allowing technology-adapters to reduce risks and position themselves more in the driver’s seat.
Understanding Increased Premiums
Trucking insurance premium increases—combined with increases in climbing equipment costs, driver pay, and, recently, fuel—are putting pressure on trucking companies to reduce expenses where they can. According to the American Transportation Research Institute (ATRI), the average carrier cost per mile for truck insurance increased from $0.064 in 2013 to $0.075 in 2017. Here’s a couple of reasons why premiums have been increasing for years for trucking companies:
The severity of claims fueled by nuclear verdicts—settlements that range in the millions—has increased dramatically in recent years. This increase can largely be attributed to the U.S. Department of Transportation’s Compliance, Safety, Accountability (CSA) Behavior Analysis and Safety Improvement Category (BASIC) scores, which are used to identify carriers at high risk for future crashes and prioritize them for interventions.
Many transportation companies believe some of the factors that impact BASIC scores have no direct correlation to how safe they are as a company. Yet, with scores like Hours of Service, Unsafe Driving, and Vehicle Maintenance publicly available, lawyers can use compliance history in combination with accident details to try to establish negligence in a court of law. This strategy can result in high jury verdicts and defense costs.
As a result, claims that might have been $200,000 five years ago have risen to $500,000 in some cases. Significantly higher settlements, jury verdicts, and fear of potential jury verdicts have increased reserve forecasts, which in turn have had a direct effect on defense costs and insurance premiums. Premiums that may have averaged $6,000- $7,000 earlier in the decade can now run as high as $20,000, especially if the voluntary insurance market continues to decline and State Assigned Risks programs are the only takers.
CSA Scores Changing to More “Rigorous” Data-Driven Model
Currently, the Federal Motor Carrier Safety Administration (FMCSA) uses CSA scores as the primary means to identify high-risk motor carriers. But a new statistical model—the IRT model—being explored by the FMCSA would utilize data to measure a motor carrier’s “safety culture,” rather than attempt to predict its likelihood of a crash, according to a piece in Transport Topics. However, it has been widely reported that FMCSA officials will not make a decision until September 2020 about whether to adopt the IRT model, which is complex and may be difficult to explain to the trucking industry.
In this litigious environment, it’s hard to know if these new rules will have an impact or if they will dissuade claimants from trying to beat the system land a lottery-type award.
Improving Safety Proactively
Instead of just going along for the ride, trucking companies can consider taking matters into their own hands by investing in technologies that can help substantially reduce risks, as well as gathering data that can reinforce a culture of safety. In many cases, the cost of avoiding one nuclear verdict may offset, or even pay for the investment. Here are a few of the most popular safety technologies being implemented by trucking companies:
- Dash Cams: Dashboard cameras on trucks are becoming table stakes and have already been positively reducing premiums. In some cases, cameras can completely eliminate a possible accident claim which would had been a difficult “he said / she said” battle in the past. Even in the case of a head-on collision, dashboard cameras simplify determining who is at fault. An easy video review process can even exonerate a driver on the spot.
- Collision Avoidance Systems: Smart anti-collision technologies that sense when a vehicle is getting too close, and apply the brakes on behalf of the driver, are already mitigating risks. While the technology has been around for several years, more 2020 rigs promise to come equipped with this technology already in place, and other retrofit options have recently come to market for older trucks. These technologies don’t just help drivers avoid accidents; they also lay the foundation for safer practices by collecting data that can be used to retrain drivers, or to create full driver safety programs for a company to make the entire fleet safer.
Over time, we have seen companies that invest in this type of technology have better loss numbers. and Comparable companies who do not have this technology may be paying two or even three times as much on their premiums. While rigs that are equipped with collision avoidance technology may cost $30,000-$50,000 extra, with fewer collisions, diminished severity of claims, and more affordable premiums, the dividends pay off down the road.
- Anti-Fatigue Technology: A slew of new innovative technologies are beginning to hit the industry to help diminish driver fatigue. While dash cams can retroactively show whether a driver was asleep at the wheel in the event of an accident, predictive technology can reduce the likelihood of dangerous scenarios. For example, fatigue meters technology uses hours-of-service logs to predict driver fatigue levels, updating managers with thorough assessments for every driver in the fleet. Wearables (like a Fitbit-like device) are similarly analyzing fatigue by measuring body movements, assessing sleep quantity, and predicting when alertness will start to decline. Even facial mapping technologies that look for symptoms of fatigue from a driver’s face, such as yawning or head nodding, can estimate driver alertness.
Data gathered from these new safety technologies can not only help identify and sideline potentially dangerous or fatigued drivers, but also help lead to more personalized training and hours-of-service regulations for each driver to increase safety.
It’s been said that you can’t stop progress. In this case, technology has come to the trucking and transportation industry. While retrofitting trucks with safety-centered technology or buying new trucks with technology already installed can seem expensive and arduous for many industry veterans, encouraging a safety-centered culture that protects drivers can pay off in the long term in the form of reduced accidents (and lawsuits), as well as lower premiums. Those in the industry quickest to embrace a safety-first mentality and support it with the best tools and protocols currently available will be ready to evolve and be more attractive to potential employees.
Peter Smelzer, AAI, AIS is a Fleet Risk Advisor for Relation Insurance Services. He can be reached at firstname.lastname@example.org or on LinkedIn at https://www.linkedin.com/in/peter-smelzer-aai-ais-209b6123/.